Lessons Learned from a FSBO Gone Wrong

I’ve had 5 successful FSBO transactions. Some as a buyer, some as the seller. By successful, I mean there was very little stress and no weird interactions. No shady players. Everyone was on the same page. And after the transaction, everyone was happy.

Turns out, those successes gave me too much confidence in using the FSBO route.

My sense of confidence and accommodation burned us.

People, if you’re on either side of a FSBO transaction, please be careful. I wasn’t and we ended up paying a price for my carelessness. I was in charge of the transaction; I fucked it up.

Here are the lessons I learned as a FSBO buyer (as I “noted” them to myself on my phone):

-Do not ever miss a contingency deadline or contract date. If you will miss the date, file for a time extension in writing. If the sellers won’t agree to that, void the contract. Verbally stating dissatisfaction with contingency does not make the contract void. To void a contract, you must file a paper document stating such.

-By not presenting updated paperwork voiding a contract or extending a deadline, it could be argued that you had agreed to proceed with the original contract. Do not get into weird gray areas like this!

-If the seller tries to drag their feet, or ignores you for so long that you’ll miss one of your contingency deadlines, say “hey, our deadline is today. We need to sign a 7 day extension extending this contingency date”. If they won’t sign the extension, immediately have your lawyer cancel the contract. Time is of the essence.  Any weird behavior here is a serious red flag and note to self that you may not want to conduct a major business transaction with this type of person.

-If the seller tries to insist you must wait for their own estimates from your inspection report, you do not need to do that. Make your new offer in writing. They can take it or leave it. SIMPLE (don’t be too accommodating, it can bite you in the ass).

-If the seller says they can get a repair done for cheaper than your estimate, that’s their problem, not yours. You have the right to use your own people/estimates so that work is completed correctly. (better yet, do a price reduction and have your own repairs done by your own people).

-As nice as it is to negotiate verbally, your words can be twisted or taken out of context. It is always best to negotiate in writing right out the gate. Know what you want and present the paperwork. They can sign it or leave it.

-If a seller has bragged about how good they are at getting great deals and how good they are at nickel-and-diming, run. Just fucking run. Because they will derive pleasure from constant haggling and arguing, slowly sucking every bit of magic out of the deal. (this may be a personality thing… this type of behavior drains me).

-Ask around about the person you’re transacting with. If multiple people have had negative real estate interactions with your seller, either walk away or add an unusual contingency such as, “I reserve the right to back out of this deal at any point, for any reason, until 3 days prior to closing. However, should I do so after our contingency period, seller can keep the earnest money.” Or something to that effect… Just in case they pull a shit tactic you hadn’t thought of. They probably won’t agree to this contingency, but all the better because you don’t want to do business with people who have a shady reputation anyway, right?

-If it is an investment property, include a contingency for buyer’s satisfaction of insurance quotes. Give at least 10 days for this as there may be hiccups. This is especially important if you’re unsure of your seller’s reputation. You need a solid estimate of your overhead expenses. My insurance quote was 4 times what the seller had told me their insurance cost was. This was enough to turn the investment from a nice profitable one to a shitty one. For my own projections, I doubled the insurance cost. I was still way too far off. (There was an unusual underwriting change to multi-plexes that negatively impacted property I was buying- neither the seller nor myself could have ever predicted it)

-Stipulate any repairs/replacements are finished with “new” materials. Sounds pretty fair, right? Sadly, not everyone thinks so. And I repeat, if possible, do a price reduction instead of negotiating repairs.

-Always use verbiage in the inspection contingency such that you don’t need to share the inspection report. Some people will use the report to argue every single tiny detail till your eyes bleed.

-If a seller doesn’t want to renegotiate a price and they’d prefer to do the repairs themselves while leaving the price the same… you should probably walk away because the time and stress it inevitably causes probably won’t be worth it.

Here’s my biggest take-away after I read through my “notes” to self.

Always ask for a price reduction instead of negotiating for repairs to be made or repair escrow/cash back. This simple tactic will protect you from countless headaches you could never imagine.

Of all our transactions, this is the ONLY one involving repair negotiations/estimates. Every other transaction, we utilized a price reduction instead. Never, ever, ever again will I negotiate repair costs or get into the nitty gritty of what things cost. I’m the buyer. You’re the buyer. It’s the buyer’s decision.

If you get a dissatisfactory inspection, update the contract with a reduced purchase price and present it in paper form. That’s far more powerful and leaves way less room for things to go wrong. Simple will win, every time.

What about you? Have you ever had a contract gone wrong? Have you ever tried to negotiate for repairs rather than reducing the purchase price and if so, how did it go?

Thanks for reading,

HouseRat Zero

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